AP: Oil Prices Fall As Inventories Swell

[Psephos]

Crude oil stockpiles fell for the fourth straight week, according to a weekly inventory report by the Energy Information Administration. But inventories of refined products grew faster than market analysts had expected, pressuring prices lower.

Light, sweet crude for February delivery dropped $1.46 to $54.18 a barrel on the New York Mercantile Exchange, after sinking to $53.89 in earlier trading. The contract touched $53.88 on Tuesday -- a level not seen since June 13, 2005.

Oil prices have fallen by nearly a third since peaking at $78.40 last July and are down 9 percent so far this year.

<snip>

"This is what should have been expected," said Fadel Gheit, an energy analyst with Oppenheimer & Co. "The $70 and $60 oil were more of an aberration than reflective of global supply and demand. We've been on a high, believing it would last forever."

http://www.salon.com/wire/ap/archive.html?wire=D8MIJ8080.html


New price: $54/bbl. Weren't oil prices supposed to jump back up after the election? Heh heh, I don't believe we'll be seeing more record profits for the likes of Exxonn, OPEC, and Hugo anytime soon.

Oil prices are set in the short run at the margin of supply (the so-called "last barrel" sold), while over the longer run, they are set by equilibria of supply and demand. When economies are growing in India, China, and the US, as they did throughout 2005 and 2006, demand increases and oil is allocated to the highest bidder. Cartels hold some power over the supply side, but not as much as popularly believed.

I take the fall in oil prices as a sign that the big economies are slowing down. 2007 does not portend economic nirvana. Let's hope it doesn't portend something worse.

Peace.

[DerBeppo]

1. PEAK OIL!!!!

oh wait...

[pampango]

7. It's not Peak Oil, silly.

It's part of the conspiracy to drive down gas/oil prices before the election, so that Bushco can jack up the gas/oil prices after the election allowing his oil buddies to rake in a fortune.

Everyone knows that oil/gas prices are not set by the market (inventories, weather, etc.) but by a vast conspiratorial group of known and unknown individuals. Some of our more conspiratorial associates here will have to step up and let us know why this slimy group has conspired to drive prices down, when they were thought to be driving them up right about now to complete their electoral conspiracy.

[JVS]

21. Actually, I think it has to do with a mild Winter not demanding as much heating oil

[MGD]

26. People aren't really driving any more than they have to either I suspect.

Here in ohio, it's just shitty outside, great weather for staying home and snd typing messages on DU but bad weather for driving around.

[depakid]

8. That just goes to show

That you don't understand Peak Oil.

All of the models predict price instability, with major spikes and troughs. Oil prices for any given week or month show absolutely nothing- other than perhaps the inability of OPEC to set prices, which is EXACTLY what one expects at peak "plateau" output.

[pampango]

12. Indeed I am not an expert on Peak Oil theory.

Price instability is natural in most commodities, including oil. It certainly is true that the demand for oil is going up and the supply is stagnant, at best.

My response was meant to be directed more at the conspiracy theorists who assured each other before the election that the price of oil/gas would be artificially lowered before the election to ensure the reelection of Republicans, then artificially raised afterwards to enrich big oil conspirators.

To the extent that Peak Oil involves stagnant, or declining, supply and an increasing demand for oil and what the fear and greed of the market does with this imbalance, then I would probably agree with it.

[Demeter]

15. Try Major Recession

That's what happens when you grab something by the bottleneck....

[rox63]

2. Could also be because of warmer temps

Not as much heating oil needed in most of the industrialized world, because of global warming.

[Psephos]

3. But then more is needed to run air-conditioners

Which makes it a wash, or even increases oil demand, because cooling is less efficient than heating. Remember, too, that it's currently summer south of the equator.

Also, check the price of natural gas. It's been going up lately, while oil goes down.

Peace.

[TheMadMonk]

11. Coal for that mostly.

Air conditioning runs off electricity.

The drop in demand for heating oil was my first thought too.

[JVS]

23. Cooling is cheaper than heating in my experience

The process for heating (burning gas) might be more efficient technically, but you have to consider the amount of heating/cooling done. if it is 90 degrees, and you aircondition to 72, then you are changing the temp by 18 degrees. If it is 25 degrees an 18 degree change brings it up to a paltry 43. I've never seen an electric bill from AC as high as the gas bills I've seen in cold winters.

[PurityOfEssence]

4. Probably a good time to buy a hybrid

Fools think mileage isn't an issue at times like these.

[Psephos]

5. You're so right. If everyone drove one, oil prices would tumble farther

That's where the argument that everyone should drive whatever they want crumbles. Demand created by other people affects the price that mileage-conscious drivers must pay, too.

The price of oil rises and drops not according to average demand, but to marginal demand. In other words, when there is not much excess supply capacity, a small increase in demand can bring a big increase in price; on the flip side, a modest reduction in demand can shave a lot off the price.

Meanwhile, I hope that GM Volt car makes it to the dealer lot. Better late than never.

Peace.

[Strelnikov_]

24. Yep. Probably one of the last good chances before Chimpageddon

knocks out a big chunk o Middle East oil production.

[wallwriter]

6. Quick! Quick! Invade Iran! nt

[Earth_First]

9. Prices at the pump locally say differently...

Still in the 2.58-63-ish range for regular here locally in Rochester, NY.

[phantom power]

10. There are three factors causing this. None of them are good news.

1) There is a bit more oil on the market because poor third world countries are dropping out of the oil market because they can't afford $60/barrel oil. The people of these countries are suffering major upheaval. The first victims of peak oil. Richer countries like the US get a temporary benefit from the additional supply available to us.

2) The winter has been very very warm so far. Anybody who thinks this is good news isn't paying attention to climate change.

3) There is some residual oversupply from the 2006 rebound from the shortages of 2005. Another hurricane season like 2005 will eat up the remaining reserves plenty quick.

[pampango]

14. Thank you for citing market factors. It is always hardest on the

Third World.

[Shipwack]

13. How long until hte next refinery fire...

Or pipeline leak or oil country unrest send oil prices back up again? Not that any of things -should- necessarily cause prices to go back up, but they would be used as an excuse.

[Prisoner_Number_Six]

16. Yes... I've seen the price of gas plummeting by as much as

...er, um... hmmm...... Actually, the price of gas hasn't dropped by so much as a cent. It's actually been going UP.

[pampango]

17. Guess we are lucky in Ohio. Gas has gone down about

20 to 30 cents in the last week.

[ekelly]

22. Same here in Texas (Ft. Worth area)

Gas in my area is currently $2.08 to $2.11

[Name removed]

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[lakeguy]

25. it'll go back up, and then back down...

only each time it goes back down, it will be just a little bit higher than the last time. don't worry, you won't notice. you'll be happy you can get some for any price down the road.

to the peak oil skeptics, looking at this and laughing is no different than when you have an unseasonably cold day and laugh at "global warming". don't let that tree in the forest hit you while your chucklin. peak oil is here and the wildly fluctuating oil prices are idicative of this. when you have little to no spare capacity, small things cause large changes in price. be prepared for recession, recovery, higher oil prices, recession...rinse and repeat.:nuke: